Three events have dominated my news this week
- The impact of Coronavirus on people, events and financial markets
- The ruling against Heathrow’s third runway
- interventions by the DWP to ensure schemes measure and mange their carbon footprint.
The arguments are linked by common factors. They are all about how global issues impact us locally. I find it helpful to think and write about them together. This puts them in a wider context.
The test of all the Government positions on health, travel and pension funds should be the popular support they enjoy. The contention of this article is that strong interventions on matters of global importance are supported by the general public.
When Government decisively intervenes on behalf of the public, those who manage public institutions like the NHS, Heathrow and our pension schemes – should listen.
Why is the DWP pushing so hard on climate change?
Put at its simplest, the DWP want pension funds to work harder to reduce the carbon footprint of their schemes and their regulator says “not at the expense of the ability of those schemes to deliver results”.
In a DC context, tPR appear to be concerned that adopting a responsible approach to investment might reduced member outcomes, compromise the trustee’s objectives and even leave regulator and trustee exposed to legal challenge.
In a DB context, the impact of trustee activism might lead to a weakening of employer covenants from the likes of Shell, Centrica and BP which could lead to their schemes going into the PPF.
Infact it could be argued that any kind of intervention by trustees could have perverse consequences for the schemes they govern and the members they protect.
Against this, DWP are arguing (along with Mark Carney and “big government”) that the climate change issue is now a crisis of such proportions as to make the local arguments of the PLSA and the Pensions Regulator unimportant.
How local is trumped by global
Putting this in the context of Coronavirus is helpful. It is necessary that Governments take steps to contain and ultimately reduce the spread of the disease that mean that people’s freedoms are reduced, events don’t happen and productivity is impaired to the point that trillions are wiped off the value of the global economy.
It is helpful to think of the ruling against the third runway as the triumph of fundamental principles underlying the Paris Accord over the convenience of having easier air travel. There will be casualties from this ruling and it may also lead to a short term reduction in productivity.
But there is an acceptance amongst the British population that we do need Government intervention over the Coronavirus and I have heard very little objection to the Heathrow ruling. In both cases, we are prepared to put global considerations before local protectionism. It is important to note that for all its protectionism , the US has not been able to protect its markets from the global impact of what is increasingly looking like a pandemic.
Putting climate change at the top of the agenda
Yesterday I wrote that the Pension Regulator’s response to the UKSIF report was inadequate. I suspect that it will be seen as a sign of “inaction” within the DWP and I speculate that the Pensions Minister will now be on a collision course with private and public funded pension schemes in Edinburgh on Thursday 12th March. I will be there to see how the arguments play out.
In the meantime, I am sorry to see Amanda Latham leaving the Pensions Regulator (to join Barnett Waddingham). She has been one of a very small number of women at the tPR who has led on the need to put climate change at the top of tPR’s and the trustee’s agenda.
Reducing the impact of climate change is clearly nowhere near top of tPR’s agenda. The UKSIF report, it is unequivocal.
“Pension scheme trustees’ policies on ESG factors like climate change are vague and non-committal, and many have not even published their policies – despite their legal obligation to do so”.
Whether the trustees are governing money for DB or DC pensions, the issues are the same. Is the money being managed for the good of the climate as well as the good of the members.
I think of this from the point of view of ordinary people who are not objecting to having to prescribe their freedoms to contain Coronavirus, seem to be supportive of the decision not to build a third runway on climate change grounds and have repeatedly said that if they have to see smaller less secure pensions to protect the planet’s future, they will pay that price.
The PLSA are launching an innovative consultation
I will be interested to see what is “innovative” about it. I hope that it will innovate by asking the members of the schemes within the PLSA’s membership, what they think. I don’t think is should rely solely on the views of trustees and employers.
My suspicion is that ordinary people are out of kilter with their trustees and are more progressive than the executives of many of the organisations they work for. I am not just talking about the activists but the rank and file of people who dispose of rubbish responsibly, buy and eat responsibly, don’t drive when they can walk and who believe in doing their bit.
They seem to be putting climate change at the top of their agenda and they are the people who matter most in this debate.